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U.S. hit with 90% of the world's disaster costs in 2012

Evan Lehmann, E&E reporter

ClimateWire: Friday, January 4, 2013

The United States led the world in disaster losses last year as a massive drought seared Midwestern crops in the field and as superstorm-driven waves wreaked havoc and blackouts along the East Coast. They added up to one of the most expensive weather damage years on record.

Nearly all the world's economic damage from storms, drought, fire and earthquakes was centered in the United States as it experienced the highest temperatures ever recorded, according to Munich Re, a global reinsurance company. More than 90 percent of insured losses worldwide occurred in the United States, well above the 30-year average of 65 percent.

Half this house was left standing in Union Beach, N.J. Superstorm Sandy took the other half. Photo courtesy of Flickr.

Superstorm Sandy, a massive Atlantic storm that heaved ocean surges of up to 15 feet onto shorelines in New York and New Jersey, caused more economic damage worldwide than all its disastrous counterparts in a year with $160 billion in global costs.

Insurers are still tallying the October storm's impact, but it's expected to cost the industry $25 billion or more, surpassing the financial losses of the Sept. 11, 2001, attacks and perhaps even topping the wreckage of Florida's Hurricane Andrew of 1992. Sandy promises to be the second or third costliest disaster in U.S. history. Its total economic costs are estimated to be more than $50 billion.

The widespread drought that seared Midwest farm fields and stranded Mississippi River barges ranks as the second-most expensive disaster globally last year. It inflicted $20 billion in damage on the economy, most of which was insured through government crop insurance programs.

Three different spurts of thunderstorms and tornadoes, including a derecho in June that traveled hundreds of miles, account for the rest of the five costliest events to affect insurers globally last year. Those storms caused about $7 billion in insured losses, making 2012 the second-most expensive year on record for thunderstorm damage.

Losses increase from climate disasters, but not from earthquakes

That illustrates a trend of increasingly damaging storms since about 1980, insurers say. Over that time, losses from thunderstorms have increased sevenfold. Much of that rise is the result of expanding development, but insurers also believe climate change is having an impact. That conclusion is based, in part, on the absence of rising losses from earthquakes, which insurers say would also be climbing if damage was driven exclusively by the construction of more buildings.

"What we can clearly see ... is that geophysical events like earthquakes and tsunamis have not really changed over this period of more than three decades," Ernst Rauch, head of Munich Re's Corporate Climate Center, said on a conference call yesterday. "However, weather-related disasters like windstorms ... and climatological events have increased over this period of time."

The world altogether experienced 900 major disasters in 2012, marking what experts describe as a steadily rising number of costly catastrophes as intensifying storms strike ever-denser areas. The average number of disasters worldwide since 1980 is 800. The toll makes 2012 the third costliest year for the insurance industry worldwide, following only 2011 and 2005. For U.S. insurers, only one year was more expensive: 2005, when Hurricane Katrina and other storms pulverized the Gulf Coast.

Despite its economic damage, 2012 proved to be relatively merciful with regard to human life. The death toll, at about 9,500 worldwide, is far below the 10-year average of 106,000 fatalities. The deadliest event occurred Dec. 4 when Typhoon Bopha crashed into the southern Philippines, killing 1,100 people. Reflecting the lack of development and insured property there, and across the developing world, Munich Re listed insured losses from the storm as "minor." Total economic losses are estimated at about $600 million.

Insurance is seen as one adaptive measure to climate change, which stands to affect poorer nations more deeply than industrialized countries. Richer nations have more resources to respond to rising oceans and other threats.

Insurers find 'attribution' to climate losses

But providing insurance, even in the United States, to homeowners in coastal regions comes with its own challenges. Some criticize the National Flood Insurance Program for encouraging development in peril-prone areas by charging premiums that are too low. Critics call that maladaptation. But the program is taking steps to raise its rates on vacation homes and other structures, a step that could give buyers and owners a better sense of the risks of living in floodplains.

The flood program, meanwhile, is on pace to extinguish the money it's using to pay Sandy claims within two weeks unless Congress raises its borrowing authority by $9 billion. The program is facing its second-highest payout since being created in the late 1960s, with about $7.5 billion in claims from Sandy, said Robert Hartwig, president of the Insurance Information Institute.

A record drought eliminated the need to harvest this cornfield in St. Aubert, Mo. Photo courtesy of Flickr.

Despite the flood program's affordability, less than half the residents reeling from Sandy had flood insurance. That will increase the burden on taxpayers when Congress allocates emergency funding for rebuilding.

"Despite a history of flooding in these areas, unfortunately many people did not have flood coverage," Hartwig said. "And this is what is causing much of the urgency to get federal assistance to this area."

At the same time, Rauch said Munich Re researchers have submitted a paper for peer review that shows how climate change is resulting in intensifying storms in the United States. The forthcoming study, he says, points for one of the first times "toward an attribution of climate change to losses."

Despite the rising evidence of climatic impacts, the media's attention to these challenges tends to be intermittent. The Daily Climate, a website that aggregates climate news stories, found that climate-related coverage dipped slightly from 2011 to 2012. Its search found a one-year decrease in media coverage of 2.4 percent, resulting in 18,546 stories and columns by 7,194 writers worldwide in 2012.

That marks a sharp decline from 2009, when the site found 32,400 articles related to climate change. But there are some signs that attention to the topic is beginning to rise. Other analysts point to increasing coverage on network news shows and in the nation's largest newspapers in 2012.